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2019 (2) TMI 332 - AT - Income TaxAddition u/s 145A - assessee is liable to include the amount of excise and VAT while valuing the closing stock as on 31.03.2012 as per the provision of Section 145A? - AO disregarded the contention of the assessee and added the amount of Excise and VAT in the closing stock - Held that:- In the own case of the assessee in A.Y. 2010-11 decided the issue in favor of the assessee Hon’ble Jurisdictional High Court in the case of ACIT Vs. Narmada Chematur Petrochemicals Ltd. [2010 (8) TMI 263 - GUJARAT HIGH COURT] such duty of central excise if added to enhance the value of closing stock would result in enhanced opening stock on the first day of the next accounting period, namely, 1- 4-1997. So, next year's profits would get depressed accordingly. Over a period of time, the whole exercise results in evening out; in other words, revenue neutral. At the same time, while disturbing the value of the closing stock the assessing authority cannot change the method of accounting regularly employed. - decided in favour of assessee. Addition on account of the provision of warranty - Held that:- It is a settled principle of law that the provisions created by the assessee on the scientific basis are liable for deduction u/s 37(1) of the Act. In this regard, we find support and guidance from the judgments of Rotork Controls India Pvt. Ltd. vs. CIT [2009 (5) TMI 16 - SUPREME COURT OF INDIA] we note that the assessee has created the provision @ 0.4% of the total turnover amounting to ₹ 18,86,570/- (0.4% of ₹ 47,16,42,449/-). On perusal of the ledger of warranty replacing expenses, it was observed that the assessee had incurred actual expenses amounting to ₹ 60,21,216/- only which exceeds the provision created in the books of accounts of the assessee. The fact of actual expenses incurred by the assessee under the head warranty replacing expenses was not doubted by the authorities below. The copy of the ledger warranty replacing expenses is also available on record. Therefore, after considering the facts in totality, we are of the view that the provisions created by the assessee are not ad-hoc provision but based on the scientific basis. We also note that the assessee has been claiming the deduction for the provision of warranty expenses and there was no disallowance made by the AO in the AY 2014-15. It means the AO accepted the provision for the AY 2014-15. These provisions are allowable as deduction u/s 37(1) - Decided against revenue Addition on account of excess depreciation - assessee in respect of certain vehicle purchased before 30.09.2009 claimed depreciation @ 50% on their written down value - Held that:- The exact issue was the subject matter of appeal in AY 2010-11 & 2011-12 as well wherein after a detailed discussion on the definition of commercial vehicles and light motor vehicle, as defined under the Motor Vehicles Act, 1988, decided the issue in favour of the appellant. Since the vehicles under question are the same on which.depreciation has been allowed @ 50% and relying on the judgement of the Hon'ble ITAT in the case of ACIT Vs. Voltamp Transformers Ltd. [2013 (3) TMI 804 - ITAT AHMEDABAD] the depreciation at 50% is allowed and the disallowance of ₹ 3,74,917/- made by the Assessing Officer is deleted. Double deduction - allowability of actual expenses as well as provision for warranty expenses - Held that:- On perusal of the copies of the ledgers filed by the assessee regarding the ledger of warranty expenses, we note that the assessee in one year is creating the provision in the books of accounts which is reversed in the subsequent year by the same amount. Therefore it could not be concluded that the assessee has claiming the double deduction on account of actual expenses as well as provision for warranty expenses. Accordingly, we are of the view that there is no infirmity in the order of Learned CIT(A) hence, the ground of appeal of the revenue is dismissed.
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